Exploration And Production In Malaysia
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Probably the most exciting project in the world of Oil & Gas. The platform will be the largest ship ever built


  • Declines in production at Malaysia's major producing oil fields in the past decade have led government efforts to encourage investment in enhanced oil recovery and development of smaller, marginal, and deep water fields.


  • Malaysia is Southeast Asia's second largest oil producer behind Indonesia. Total oil production in 2012 was an estimated 643,000 barrels per day (bbl/d), slightly higher than 626,000 bbl/d in 2011. Nearly 80 percent of total liquids are crude oil, and the remainder consists of condensates, natural gas liquids, gas-to-liquids (GTL) fuel, biodiesel, and refinery processing gain. More than half of Malaysian oil production currently comes from the Tapis Oil Field in the offshore Malay basin. The country's oil production has experienced overall decline since peaking at 862,000 bbl/d in 2004 as a result of maturing fields, particularly larger fields in the shallow waters offshore Peninsular Malaysia. Some recent drilling efforts in the area such as Lundin Petroleum's Bertam Oil Field in the Penyu Basin are expected to add incremental will help offset production declines from mature fields. Lundin anticipates the Bertam field will yield 20,000 bbl/d by the second half of 2014.
  • Malaysia's domestic oil consumption has risen while production has been falling over the past decade, leaving smaller volumes of oil available for exports. The government's goal is to bring oil production back to prior levels of 800,000 bbl/d by 2015. Malaysia is working to attract new investment opportunities and reverse production declines by enhancing output from existing fields, developing small, marginal fields through risk service contracts (RSCs) that share the risk where Petronas is the project owner and investors are the service providers receiving revenues for oil produced, and tapping into new oil and natural gas discoveries in deep water offshore areas of Sarawak and Sabah basins. These deep water offshore fields pose more technical challenges, spurring greater cooperation with and incentives for foreign energy firms. Petronas plans to spend $90 billion by 2016 to boost oil and natural gas production.
Enhanced oil recovery (EOR) projects
  • ExxonMobil's Tapis EOR project, which lies 118 miles off Terengganu, is expected to begin at the end of 2013. Tapis Oil Field is one of seven mature fields offshore Peninsular Malaysia that ExxonMobil and Petronas have agreed to develop as part of a 25-year production-sharing contract that was finalized in June 2010. Under the agreement, which includes provisions for the deployment of EOR, work is being carried out on seven fields that are part of the Tapis Blend Crude Oil - Seligi, Guntong, Tapis, Semangkok, Irong Barat, Tebu, and Palas.
  • In 2011, Shell and Petronas agreed to invest $12 billion over 30 years in two EOR projects offshore Sarawak and Sabah (Baram Delta and North Sabah) covering nine fields. The projects are expected to boost reserves by 750 million barrels and use the world's first offshore, chemical injection process for resource recovery.
Risk service contracts (RSC) projects
  • In addition to EOR projects, Malaysia is also maximizing its production potential by issuing RSCs beginning in 2011. These contracts involve risks shared between Petronas, the project owner, and the contractors (foreign and domestic companies), which act as service providers. These companies receive compensation for cost and a return on investment.
  • As part of its RSC licensing rounds, Petronas awarded Malaysia's first RSC, the Berantai Gas Field to Petrofac and domestic companies Kencana petroleum and SapuraCrest in 2011. The field began production in 2012 with 50 million cubic feet per day (MMcf/d) of natural gas.
  • The second RSC, the Balai Cluster offshore Sarawak, was awarded in August 2011 to Australia's Roc Oil Company, Malaysia's Dialogue, and Petronas. Recent exploration activity in Cendor Oil Field, a marginal field located off the Malay Basin, suggests production could be 30,000 bbl/d of oil by 2014 and could provide upside production potential for small, underexplored fields.
Deep water projects - Sarawak and Sabah
  • Several major projects are under development in the deep water area offshore the Sabah state, which could bolster Malaysia's oil production over the next decade. The Kikeh Oil Field, operated by Murphy Oil in partnership with Petronas, is currently Malaysia's only producing deepwater oil field.
  • The Kikeh field came on stream in 2007 at an initial rate of 20,000 bbl/d, and estimated production in 2010 was 115,000 bbl/d of oil. However, in 2011, output dropped to an estimated 63,000 bbl/d as a result of production issues and a well leak. Murphy Oil has been working to restore production, which is expected to peak at 120,000 bbl/d.
  • Also, in offshore Sabah, the Gumusut Kakap Oil Field is under development and will include the region's first deep water floating production system from 19 subsea wells. Gumusut/Kakap came on stream at the end of 2011 with production of 25,000 bbl/d. Its production is expected to ramp up to 120,000 bbl/d by the end of 2013 once the new floating production system is commissioned. Shareholders are operator Shell with 33 percent; ConocoPhillips with 33 percent; Petronas with 20 percent; and Murphy Oil with 14 percent. The system will be connected via pipelines to the new Sabah Oil and Gas Terminal being built in Kimanis in the Northeast Sabah state.
  • The Malikai Oil And Gas Field, first discovered in 2004, is located offshore Sabah and holds a production capacity of 60,000 bbl/d. Malikai will be tied into the Kebabangan Northern Hub development project (KBB) via a liquids and dry gas pipeline shortly after first gas comes from KBB. Shell, the operator and a 35-percent stakeholder, expects to bring Malikai online in mid-2015. Other project partners include ConocoPhillips (35 percent) and Petronas (30 percent).
  • Development is also underway at the KBB, which will tie together the Gumusut/Kakap, Malikai, and Kikeh oil fields. KBB will be a hub for the development of deep water oil and gas assets offshore Sabah. The KBB platform has a design capacity of 825 MMcf/d of natural gas and 25,000 bbl/d of condensate.
  • Petronas recently announced that it discovered the country's first onshore oil and gas field in over two decades in Sarawak. The field's current initial flows are 440 bbl/d of crude oil and 11.5 MMcf/d of natural gas, which may help boost hydrocarbon production.
Boundary disputes
  • Malaysia began cooperating with neighboring countries bordering the South China Sea to exploit the area's significant hydrocarbon potential. The Commercial Arrangement Area (CAA) in the Malay Basin, which Malaysia shares with Vietnam, also contributes to the country's oil production. Talisman Energy (Canada) holds operating interests in the Northern and Southern oil fields in the CAA. While the Southern Fields are still under exploration, the Northern Fields development began producing 25,000 bbl/d in 2009, reportedly rising to 50,000 bbl/d in 2010. The shared area also produces about 250 MMcf/d of natural gas. Talisman holds a 41 percent interest, Petronas holds a 46-percent interest, and PetroVietnam has a 13-percent interest.
  • The 20-year dispute between Malaysia and Brunei over land and sea boundaries was resolved when the two countries signed a boundary agreement in April 2009. Blocks L and M were ceded to Brunei, while Limbang, on the Sarawak-Brunei border, was ceded to Malaysia. In 2010, Petronas and the Brunei government agreed to jointly develop the two blocks offshore Borneo Island, and they signed a 40-year PSA for newly named Blocks CA1 and CA2. Drilling commenced in 2011, along with further investment plans.
  • As discussed in further detail below in the natural gas section, Thailand and Malaysia signed an agreement in 1979 to jointly develop oil and natural gas reserves from the Malaysia-Thailand Joint Development Area (MTJDA), which overlaps the maritime borders of both countries.
  • Other areas in the South China Sea such as the Celebes Basin that borders Indonesia and Malaysia have remained underexplored because there are competing territorial claims between the two countries. Shell holds an exploration contract with Petronas for two deep water blocks off the east coast of Sabah; however, Indonesia also awarded separate PSCs for the blocks and claims them. It is likely these PSCs will be dormant as long as territorial maritime disputes remain unresolved.

Natural Gas

  • Malaysia's natural gas production has risen over the past two decades to serve the growing domestic demand and export contracts. Recent foreign investment in deep water and technically challenging fields primarily in the Sarawak and Sabah states provides impetus to maintain natural gas production levels over the next few years.
  • Although Malaysia's dry natural gas production has risen steadily over the past two decades, reaching 2.2 Tcf in 2011, growth slowed since 2007. Meanwhile domestic natural gas consumption has increased, reaching 1.1 Tcf in 2011, and accounted for about 50 percent of production.
  • The power sector consumes about 74 percent of the Malaysia's natural gas market sales, and demand for power especially in Peninsular Malaysia is expected to increase. Rising domestic demand and LNG export contracts place pressure on the gas supply, and Malaysia is actively investing in reservoir development to meet these needs.
  • There are several ongoing projects that will expand natural gas production in Malaysia over the near term. Exploration and development activities in Malaysia continue to focus on offshore Sarawak and Sabah.
Malaysia-Thailand Joint Development Area
  • One of the most active areas for natural gas exploration and production is the Malaysia-Thailand Joint Development Area (MTJDA), located in the lower part of the Gulf of Thailand and northern part of the Malay Basin. MTJDA reportedly holds 9.5 Tcf of proven plus probable natural gas reserves.
  • The area is divided into three blocks, A-18, B-17, and C-19, and is administered by the Malaysia-Thailand Joint Authority (MTJA), with each country owning 50 percent of the MTJDA's hydrocarbon resources. Production at Block A-18 started in 2005 at the Cakerawala Gas Field, and the project's second phase brought on the Bumi, Suriya, and Bulan fields in 2008.
  • Total gas production from Block A-18 is estimated to be 390 MMcf/d. Block B-17 came online in 2009 and produced 335 MMcf/d in 2010. Total production from the joint area was over 700 MMcf/d in 2011.
  • The countries signed another agreement for production from the Bumi Bumi field, where 60 percent of the production will be designated for the MTJDA. MTJA continues to explore the area for more hydrocarbon discoveries.
Projects in Sarawak and Sabah
  • Most of Malaysia's natural gas production is offshore Sarawak and supports LNG exports from Bintulu. Shell has signed three oil and gas PSCs with Petronas in 2012 and stepped up drilling efforts in 2011 to continue developing gas and condensate production offshore Sarawak. The PSCs cover blocks SK319, SK318, and 2B in the Central Luconia Basin.
  • In 2009 Murphy Oil announced the startup of several smaller new gas fields located in Blocks SK309 and SK311. The Sarawak Gas Project, located 137 miles offshore Sarawak, contains a cluster of fields that are being developed as part of a multi-phase project to supply gas to the Bintulu LNG Terminal. Gas sales from the fields are currently 250 MMcf/d. Murphy Oil holds an 85-percent interest in the project, and Petronas holds a 15-percent interest.
  • Newfield Exploration made a significant gas discovery in its SK-310 PSC offshore Sarawak in 2013. The company claims the find could boost gas resources by 1.5 to 3 Tcf. Newfield holds 30 percent, while Petronas and Mitsubishi have stakes of 40 percent and 30 percent, respectively.
  • The Kebabangan Petroleum Operating Company (KPOC), a consortium consisting of Petronas (40 percent), ConocoPhillips (30 percent), and Shell, the operator, (30 percent), are developing three contiguous gas and condensate fields including Kebabangan, Kamunsu East, and Kamunsu East Upthrown Canyon (KBB Cluster) in the northwest Sabah state. The Kebabangan field is estimated to hold 2 Tcf of gas. Production for KBB is expected to begin in 2014.
  • As part of the Sabah-Sarawak Integrated Oil and Gas Project, Petronas is commissioning the Kinabalu Non-Associated Gas development. Kinabalu is expected to have a production capacity of 300 MMcf/d and be available by the end of 2013.


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